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May 12, 2014

Tom Nally, Not Just Cheering but Leading: The 2014 IA 25 Profile

The head of TD Ameritrade Institutional feels good about his firm’s offerings, but worries about the next generation of advisors and clients and the underserved sectors of the American population

Nally is a cheerleader for RIAs, but he knows the industry is facing challenges too.

When Tom Nally first appeared on the IA 25 list in 2012, the first several paragraphs of his profile were as much about his predecessor, Tom Bradley, as it was about Nally. Two years later, it’s all Nally, who has stamped his own personality on the RIA custodian.

While Nally is a cheerleader for the RIA model, as might be expected for someone in his position, he’s no Pollyanna when it comes to the challenges that RIAs and TDAI face. He began an April interview by saying, “We try to be an industry leader in all the areas of the market where we engage,” but “we can’t be all things to all people.”

Technology, which he said is critical to helping its RIAs “build scalable businesses.”

Trading, which he says is increasingly a “differentiator for advisors.”

Practice management, where “we don’t want to be publishing white papers” but rather “take a more tactical solutions approach.”

Advocacy for advisors, reflecting “our fundamental belief in the RIA model” while also mentioning that “we referred $25 billion to advisors through Advisor Direct,” its referral program.

Human capital, which includes its hiring practices where they value prospective employees for “what their capabilities are more than what their experience is.”

He admitted, however, that as an industry, “We still have a lot of work to do” in rebuilding trust among the investing public. Since the interview occurred just days after writer Michael Lewis charged in a “60 Minutes” segment that the “stock market is rigged” in favor of high-frequency traders, Nally said, “We’re in another reputational crisis in the industry right now.” While the markets “are not perfect, never have been, the ultimate loser is the individual investor when” somebody like Lewis charges that “‘the markets are rigged.’” It may “scare people off” from participating in the markets.

Nally also said that advisors and their partners “need to do a better job of adapting our business model to better serve” underserved sectors of American society, including younger people, women, the less affluent and the less white. He said the “solution” is “about embracing diversity. You want your team to reflect the market you’re selling into; we must attract more women and minorities.” Another part of the solution is technology, “the great enabler,” because “the more efficient an advisory firm is, the more services it can offer.”

Speaking of the generational wealth transfer, “we have more work to do there” as well. The next generation “is a powerful force,” and since “I’m a next-genner myself, I understand the challenges” (Nally is 42). That next generation has “different values, different preferences than the boomers.” TDAI and the entire industry, he argued, “need to do a better job attracting the next gen of advisors” since “clients want somebody who looks like them from a gender and ethnicity” viewpoint.

“The statistics are sobering—only 6% of advisors are under the age of 30,” which is why TD has launched its scholarship and financial planning program grant programs, and it internship initiative.

As for the challenge of “robo-advisors,” Nally put it into the context of understanding the needs of clients “based on their current life stage. They might not need a more comprehensive plan” than what robo-advisors now offer and what most advisors do not. “One of the challenges we’re facing now is that technology is evolving faster than the ability of advisors to bring that technology into their shops.”

Returning to his still relatively recent ascent to the top of TD Ameritrade Institutional, Nally said of his current position that “it’s a job I’ve been preparing for, for many years. I feel privileged to sit in this seat and serve these advisors for what they do for their clients. They’re the folks who are doing the right thing for their clients.”

Returning to the Michael Lewis charge, he worries about “Mr. and Mrs. Jones sitting on their couch thinking the markets are rigged, so they miss out on participating in those markets—their future won’t be as bright.”

(Check out Investment Advisor's full IA 25 for 2014 list on ThinkAdvisor.)

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